We had a chat with Lucy Trynka, Senior Solicitor in Employment Law at Rollits, about the new Allocation of Tips Act.
The new Employment (Allocation of Tips) Act 2023, effective from 1st October 2024, aims to ensure that tips and service charges in the UK hospitality sector are distributed fairly amongst workers. Although the legislation does not prescribe what will be deemed ‘fair’, it does state when determining this, employers must have regard to the Code of Practice published by the secretary of state which accompanies the new legislation.
Lucy Trynka, Senior Solicitor in Employment Law at Rollits, said: “Under the new rules, employers are required to have a written policy outlining how employer-controlled tips will be allocated and must keep records of all tips for three years. Tips cannot be subject to any deductions, including card provider service charges and administrative costs, and workers must receive their share by the end of the next calendar month following the payment of the tip by the customer. The law also emphasises that tips earned at one location cannot be redistributed to employees at another, ensuring that staff benefit from the tips earned in their specific venue.”
The legislation aims to address concerns over the previous lack of transparency and fairness in tip allocation, which has often led to employees receiving less than they deserve. By ensuring that 100% of qualifying tips go directly to the workers, the Act seeks to enhance the quality of service and encourage fairer compensation for employees in the hospitality sector.
“Businesses in the hospitality sector need to ensure that their new policies include permanent staff, part-time team members, zero-hour workers, agency workers, and so on,” said Lucy. “Also, all workers involved in providing a service to customers need to be considered, such as chefs and managers. The legislation is not stated to be limited to servers.”
The Code of Practice is helpful to employers in navigating their obligations under the new legislation. Whilst it does not set out an exhaustive list of factors for employers to consider, it provides overarching principles on what fairness is for the purposes of the Tipping Act, the areas in which employers need to make decisions to comply with their duties, and how they should apply these principles in their specific places of business. The Code recognises that what will be fair in one place of work will not be fair in others, e.g. due to size, number of employees, nature of work etc.
“Where tips are managed through a Tronc Master or another external third-party, the employer still remains responsible for ensuring fairness. Any tips paid for by card will now have to be distributed to employees without any deductions.”
Lucy also recommends that employers consult with all employees on their method of allocating tips, keep everyone in the loop, and explain why it’s a fair system. Agreement prior to the policy taking effect will assist the employer in defending any subsequent claims from employees that the tips are not being allocated fairly in accordance with the legislation. Consultation with employees is also recommended as an appropriate step in the Code of Practice.
“Employees can now take an employer to tribunal within 12 months of not fairly allocating tips. They can also make a claim for failure to have a written policy in place or failure to keep records within three months,” added Lucy. “This means it’s crucial that businesses have their policies and procedures in place as soon as possible.”
Employers also need to ensure that they avoid any unlawful or indirect discrimination when seeking to comply with the new legislation. For example, it may be that a worker who can only work daytime shifts due to childcare arrangements needs to be allocated a fair share of tips received during busy evening shifts. There’s a lot to factor in, which is why the team at Rollits is here for consultation, guidance, and help with writing new policies.
If your business takes tips from customers, make sure to get in touch with Rollits for expert advice.